Role of Development Banking in Economic Growth in Kenya

Abstract

Purpose: This study delineates the impact of development banking on Kenya's economic growth. The current study adopted a quantitative and exploratory research design. Materials and Methods: The study used a quantitative research design. Secondary data was utilized in this study. The data was collected from the financial statements of development banks in Kenya. The target population was 6 development banks in Kenya. The study then progressed to more complex regression analysis, where financial performance ratios and percentages for predictor factors formed the basis of the analysis. The study focused on 6 development financial institutions operating in Kenya. Findings: The findings (β=0.1153, p=0.0056), reveal that development banking had a positive and significant effect on economic growth. This infers that an improvement in development banking by one unit would lead to an improvement in economic growth by 0.115 units. The investigation substantiates a tangible and statistically significant correlation between the maturation of the development banking sector and the economic growth spectrum in Kenya. Implications to Theory, Practice and Policy: Policymakers in Kenya should work to maintain a stable regulatory system that enhances the role of the banking system in stimulating economic growth. The study emphasizes the need for a stable regulatory environment and well-considered interest rate policies to mitigate adverse economic impacts. Additionally, the study advocates for a pro-poor banking approach to reduce wealth disparities and boost economic growth through improved savings and customer deposits in banks. the banks.